Dear Students and Friends Further slide in our Economy? Today again bad news spattered in various news columns on country’s Economic Fronts. Though rupee value has been propped up a little but due to RBI interventions and also some direct non trade controls. Obviously, they do provide only temporary palliatives. Our FM has gone to US pleading that our economic woos are just temporary and economic fundamentals are strong. Do not know how much it would be taken seriously by the investors on its face value. Efforts to open most of the sectors of the economy to higher limits of FDI investments can only succeed if investors are convinced about recovery of economy in the future. This is notwithstanding that many of the Govt. departments are at loggerhead for opening select sectors to FDI. Industrial output fell 1.6 % in May due to lower manufacturing and mining activities - indicating that buyers are cutting down consumption of almost everything from basic goods to durables and consumer goods ; Capital goods production shrank 2.7% in May indicating that companies are not investing in expanding production capacity. Further, exports have fallen by 4.5% to $23.7 bn. However there is some good news that trade deficit declined to $12.2 billion due be fall in gold imports. Inflation is threatening to reach double digit as it measured 9.87% in June compared to 9.31% in may showing that RBI may not be able to reduce repo rate to stimulated growth. With the depreciation of rupee there will be further increase in petroleum and diesel prices which will exacerbate the inflation. Auto production already slid by 5% in June 13 (Commercial vehicle has shown steepest fall of 13%) and now Society for Automobile Manufacturers are crying hoarse and want sops for the sector. Many top automobile producers are cutting down production and declaring several days of non working days. The pullout by FII which amounted to almost 4.5 bn dollars in the first week of the month the forex reserves have fallen a low of $280 bn on July 5 - a 3 year low.(It was 320 billion dollars in 2011) . They can cover imports of 6 months only More stronger will be the revival of US Economy more such outflows will take place and more troubles for the economy. There is only one good news that monsoon is going to be favourable so food prices may show some fall in the future. Besides further applying measures which could conserve foreign exchange there the need for issuing sovereign bonds that too on attractive terms so that with the improvement in US economy it may not lose its luster is the option left out with the government.
Posted on: Sat, 13 Jul 2013 12:53:20 +0000
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